Eric Schmidt reanimates el cheapo PC zombie

Fail and You Last week, Eric Schmidt ran his mouth off again at the Morgan Stanley Technology Conference in San Francisco. Schmidt commented that one of the new business models in the pipe for internet businesses is giving out free or subsidized computers to users and stacking paper on the ad revenue.

He didn't actually say that this is something Google or its partners would be pursuing. He was completely noncommittal about the whole thing, because, ya know, he didn't want to be blamed if the idea turned out to be a colossal fuck-up, just as it's been every other time somebody has tried it.

Schmidt insisted that "cloud computing is one of those changes that's going to happen... whether or not companies want it to." That's a pretty lofty statement for a company that has failed to make any substantial money from cloud hosted apps. But still, let's overlook that for the time being. The idea that service providers are again going to start handing out cheapo machines to users, bringing back from the dead the business models behind PeoplePC, eMachines, and to a certain extent NetZero, is worrisome.

I'm not worried that another metric ass-ton of investor money is on its way down the toilet. No, that's just the third act act for the Silicon Valley Comedy Troupe. I'm a little worried that the zombie business models will beget more zombie business models, and you and I both know that the only way to kill a zombie is a Bruce Campbell-delivered shotgun blast to the face (or as those of us in the biz lovingly call it, exfoliation).

Twelve-gauge, double-aught exfoliation aside, I'm worried that the reanimation of dead business-model flesh shows just how out of touch with reality the leaders of the tech industry are.

I Guess That's Why You're Broke And They're So Paid

When Web 2.0 died, it took the dream of web app ubiquity with it. It's not that the idea sucks. It's every sysadmin's dream to abandon the Microsoft Office patch death march in favor of sending a user to some website to do their work. The dream died in the disconnect between normal users and the technological idealists. Yes, it would be convenient from a lot of perspectives if everyone used Google Docs instead of Microsoft Office, if only for the sake of protecting users from themselves. The problem is that users just didn't care enough. But why not?

Web apps simply aren't compelling, and people are too used to their ways of doing things. Perhaps this is why Google Chrome, the highly touted Web Operating System, quickly grew to a healthy one percent of the market and then flatlined. Perhaps it's why Zoho, the Web 2.0-darling powerhouse out of Pleasanton, California, with its monotone reimplementation of Microsoft Office as a web app, hasn't made any encroachment into Microsoft's business that can't be dismissed as floating point round-off error.

Perhaps that's why the only Web 2.0 companies still left alive are communication tools, and not apps useful outside of your lunch hour. (Incidentally, the people who run these user-rich communication tools are struggling to find a profit that's distinguishable from round-off error. Twitter, I'm looking in your direction.)

The Days of Muppet Pointer Shuffling Are Over

When it comes to justifying their business, Google loves to harp on Moore's law. Computers get twice as powerful every year. Squeezing every bit of performance out of a machine just isn't as important anymore. You can program in Java or Ruby instead of wasting time shuffling your pointers about in C++ like a muppet. This is great for a programmer, but for the vast majority of users, we have just gone rocketing past the point of diminishing returns.

Computers may get twice as powerful every year, but users don't have twice as much demand for computing power. There's going to come a point, likely very soon, where people will begin to ask why they need a 4GHz processor and 8 gigabytes of RAM to do word processing or spreadsheet manipulations – the same word processing and spreadsheet manipulations they have been doing for the last decade.

Web 2.0 really felt like it was going to work too. It's like we saw a great performance by the Mamas and the Papas and thought "Boy, that Michelle Phillips is a real dish, and she can sure sing". But now, we've figured out that Mama Cass was the only one with any real talent. No matter how much you want something, you just can't will it so.

And No One's Getting Fat Except Eric Schmidt

Google's arrogant hubris in all of this is just a reflection of Silicon Valley's shit-don't-stink attitude towards, well, everything. And what of this netbook subsidy business then? Are web apps struggling so much that we need to bribe people with shiny new shit to get them to use our software? Or can web entrepreneurs simply not admit to themselves that their new, smarter economy has failed?

I mean, this business model has already been proven - proven to suck. If the computer subsidy really does rise from the grave, it's just the next iteration of people not admitting it when they're wrong. The more your business model is abstracted from the fundamental transaction of selling shit to customers, the more you need to wave your hand about the specifics of making money.

Come to think of it, this sort of shystery, I'm-smarter-than-everyone attitude toward business is what has just given the world economy a baseball bat to the windpipe. Well, that and the idea that everyone has to be buying shit all the time. For being such a self-proclaimed moral pillar, Google certainly capitalizes on this, and although they've been somewhat cushioned by their magic money machine, advertising still comes down to customers buying things from merchants.

"It's a reasonable bet that Americans will go back to what they do best, which is spend money," Schmidt says, admitting that you can be as unique a snowflake as you want, as long you click on the occasional AdWord.

On second thought, Eric, maybe you should buy everyone a new computer. It'll ease up that credit card debt load come the next market crash. ®

Ted Dziuba is a co-founder at Milo.com You can read his regular Reg column, Fail and You, every other Monday.